Using gravity models, our empirical results suggest that China imports more land-intensive goods from countries with less population. Consistent with international trade theories, China has strong comparative advantages in labor-intensive goods. Thus, cheap and high-quality labor forces in China are the most important source of China's Next, direct investments to China weakly increase exports from China to host countries. It is more likely that direct investments to China increase triangle trades among Asian countries and areas rather than direct trades with host countries. However, we also examined that it is more likely for in China large firms to expanse firm sizes at the sacrifice of profitability, due to dysfunctional corporate governance structures. Our study provides an explanation for the conflict between good performance of macro economy and low profitability of listed firms in China. Without doubt, foreign direct investments to China are another sources of China's competition power. China's policies to attract foreign direct investments have important lessons for economic development. Theoretically, we show that restrictions on controlling foreign shares in certain domestic industries (such as automobile, telecommunications, banking, insurance, etc) might be at the expense of efficiency loss by eliminating the possibility of an integrated ownership structure, which may generate the higher total surplus (efficiency). Leaving ownership arrangements in the hands of firms may result in a mutually beneficial outcome. By using data on Japanese electronics firms, we find that distribution affiliates are important when setting up manufacturing affiliates because of the high uncertainty and/or demand increases in Asian markets including China.